The Pakistan Economic Survey 2022-23, released on Thursday, revealed that the cost of tax exemptions and concessions in the country rose by over 51 percent to a staggering Rs2.24 trillion, compared to the previous fiscal year.
According to the official data from the Federal Board of Revenue (FBR), the total tax expenditures for the fiscal year 2021-22 stood at Rs1.48 trillion. The sharp increase in tax expenditures during the fiscal year 2022-23 indicates a growing trend.
The cost of exemptions in income tax increased slightly to Rs424 billion during the outgoing fiscal year, from Rs400 billion in the preceding fiscal year. This modest increase still adds to the overall rise in tax expenditures.
However, the biggest spike in exemptions and concessions occurred in sales tax laws, where the cost soared by a whopping 75 percent to reach Rs1.29 trillion during the fiscal year 2022-23, from Rs710 billion in the previous fiscal year. This huge increase shows the extent of concessions given under sales tax rules.
Moreover, exemptions given on customs duty also increased significantly by 52 percent, amounting to Rs522 billion during the fiscal year 2022-23, from Rs344 billion in the previous fiscal year. This upward trend in customs duty exemptions reflects the government’s efforts to encourage certain sectors or activities.
The rising cost of tax exemptions and concessions has both benefits and challenges for the economy. While these measures may offer relief and support to specific industries, they also affect revenue collection for the government. Finding a balance between promoting economic growth and ensuring a fair and efficient tax system remains a vital task for policymakers.
It is important for the government to assess and monitor the impact of tax exemptions and concessions on the overall fiscal health of the country. Evaluating the effectiveness and targeting of these measures will be helpful in maintaining a sustainable and equitable tax regime.